The directors of a company or members of an LLP are responsible for complying with the requirements to keep a register of People with Significant Control (PSC).
They must take reasonable steps to determine whether any individual or any legal entity meets the conditions for being a PSC or registrable RLE (Relevant Legal Entity) in relation to the company, and if so, who that person or registrable RLE is. It may be that, having taken these steps, they cannot identify the person or confirm their details, but failure to take reasonable steps is a criminal offence.
What are the reasonable steps to take to identify PSCs?
The following applies to a company, but would equally apply with terminology changes to an LLP:
1) Consider all of the documents and information already available to identify if there may be a PSC. It will be necessary to consider interests held by individuals, legal entities and trusts or firms (without legal personality). Consider whether there is evidence of any joint arrangements or evidence of rights held through a variety of means that might ultimately be controlled by the same person. Documents which should be available to the director(s) and which should be reviewed include the following:
- Register of members
- Articles of association
- Shareholders’ agreements (although these may not be readily available to the director(s))
- Covenants or agreements which concern the appointment or removal of directors holding the majority of votes at board level
- Other documents may be available and may be relevant depending on the circumstances.
Consider whether anyone has significant influence or control over the way the company is run. Also consider whether there is a trust or firm (without legal personality) which would give rise to a position where that trust or firm was able to satisfy one of the conditions for PSC.
2) Having determined that there is a PSC for the company the director(s) should ensure they have the relevant information about him or her to enter on the PSC register.
3) Information about individuals (PSCs) needs to be confirmed before being put on the PSC register (this does not apply to corporations sole, government bodies or international organisations). Information can be treated as confirmed if the:
- PSC supplied the information to the company
- information was provided to the company with the knowledge of the PSC
- company asked the PSC to confirm the information was correct, and they replied that it was so
- company holds previously confirmed information and have no reason to believe it has changed.
4) Information about both PSCs and registrable RLEs needs to be complete before it is entered onto the PSC register. When the information about one PSC or registrable RLE is complete it should be entered onto the PSC register as soon as possible. If there are other PSCs or registrable RLEs then reasonable steps should continue to be taken to gather information on these.
5) If an individual or legal entity has been identified as a PSC or registrable RLE but the required information is not available to enter into the PSC register or confirmation is outstanding then the company should serve notice on the individual or legal entity (normally by post or email, and a record of this should be kept). If that an individual or legal entity holds the interest on behalf of someone else, they should be asked to provide the contact details of any such individual or legal entity and notice should then also be served on that individual or legal entity.
6) Individuals or legal entities must contact the company within one month after becoming a PSC or registrable RLE if they are required to be on the company’s PSC register but they are not. Failure to do so is a criminal offence.
7) If the director(s) have reason to believe that there is a PSC or registrable RLE in relation to the company but have not been able to identify them then they should consider serving notices requesting information on anyone they consider should know the identity of the PSC or legal entity or trust or firm, or could know someone likely to have that knowledge. This may include advisers known to act for them such as accountants, banks, lawyers or any other contacts such as family members, business partners or known associates. The notice which has been served requires a response to be made within one month. Failure to respond (without a valid reason) is a criminal offence.
8) If no response is received then the director(s) may send an additional warning notice. If no response is received to this additional warning notice within one month of that warning notice, then the directors can impose restrictions on any shares or rights they hold in the company (or any rights they hold in the LLP). If restrictions are imposed, the person who is not responding can derive no benefit from the shares or rights they have in the company or LLP until the restrictions have been lifted. The company is not required by law to impose restrictions but the directors must consider it as part of meeting their legal obligations to take reasonable steps. If the director(s) choose not to apply restrictions the reasons should be recorded as they may be asked to justify that decision.
Entering information on the PSC register
The company’s PSC register must never be empty.
When the company is in the process of taking reasonable steps, this must be entered on the PSC register. You can find the example wording in the June issue of In Practice
ACCA has produced other guidance relating to the PSC Register
The Department for Business Innovation and Skills has produced a detailed guide relating to the PSC Register
Article from ACCA In Practice